Paul Is Back and Jumps Right Into the Big Beautiful Bill Act (Part 2)

The Big Beautiful Bill and the Deficit

Paul Winkler: All right, back here on “The Investor Coaching Show,” Paul Winkler. Yeah, the new tax law has been a topic of conversation.

As you can imagine, people are asking what I thought about things. And there’s just a lot of stuff that I was happy to see.

The issue that kept coming up over and over again was the price tag. How are we going to deal with the debt that this was going to create? And this was actually talked a little bit about.

The CBO, the Congressional Budget Office, makes a projection about what the tax bill will cost, and you’ve heard all kinds of numbers. Let me just have you just check this out, just for a real quick second, and I’ll comment on it.

Speaker 1: The CBO says this is a $3.3 trillion problem, effectively, right?

Speaker 2: Right.

S1: You say it’s what?

S2: So, CEA, my colleagues, have estimated it’s going to cut the deficit by 2 trillion. Here’s what I could tell you, Andrew.

S1: That’s a massive delta between the two.

S2: Right. This is my big issue with the CBO is they’re assuming only 1.8% GDP growth over the next 10 years. That, to me, is historically low and pessimistic.

It doesn’t account for the fact that productivity growth is accelerating. It doesn’t account for the fact that, under President Trump’s first term, the economy grew nearly 3%.

PW: Okay, so let me just stop it right there for a second. So when the CBO does projections, they’ve got to figure out, hey, how is the economy going to grow?

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Now, if the economy grows, what happens? You get more tax revenue. If people earn higher incomes, you get more tax revenue. 

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If companies earn more money, you get more tax revenue. I don’t know. If you have, let’s say, some productivity growth, you get more tax revenue. There are a lot of reasons that tax revenue can grow, but if you’re projecting a super, super low growth rate, when there are so many things like regulations, changes in how companies are because of the tariffs that are looking at relocating or putting some operations in America, if you’re looking at how the taxes are lower or having some predictability, that’s another thing.

What to Expect

One of the things that we’ve heard people complain about is we don’t know what to expect. But as legislation comes out and we know what the tax rules are going to be going forward, that level of expectation grows.

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We know what to expect, we know what’s going to happen, and therefore, companies will actually start to make plans. 

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If I don’t know what to expect, I don’t want to make any plans, because it’s dangerous. I could be stepping into a land mine because all of a sudden, the land shifts under me.

But if I know what to expect and all of a sudden some of these bills start to pass and maybe some of the dust settles regarding tariffs and those types of things, then all of a sudden companies will start to make plans going forward. And when they do that, growth tends to take off.

And what he’s basically saying here is that all of their projections were based on things being really, really bad and continuing to be bad, or just all that uncertainty continuing. And that’s not necessarily what we’re seeing is going to be likely.

S2: It doesn’t account for the fact … you know technology well.

S1: Right.

S2: What about this AI boom? You’re telling me you’re going to go under 2%? Their productivity is going to be in the low ones?

And therefore, if CBOs … Forget current policy baseline, forget all these laws. Just look at their numbers.

They’re unbelievably pessimistic. I don’t understand why. And if their growth numbers are low …

S1: What was your growth number, just so we know?

S2: So CEA has modeled 2.8%, but it’s not fully dynamic.

S1: Well, that’s a full percentage point higher, Richard.

S2: Well, but that’s what we averaged under the first Trump administration.

PW: Yeah. And it’s not an obscene number by any stretch of the imagination when you’re looking at the productivity growth that can continue or can be present with how companies actually apply AI. You go, “Wow.”

Opportunities from AI

Matter of fact, the Amazon CEO made a comment about AI, and I thought that was interesting.

Andy Jassy: I think that AI and generative AI specifically is the most transformative technology of our lifetime, which is saying a lot given that we’ve had the internet, we’ve had mobile, we’ve had the cloud. But I think it’s going to end up being the most transformative technology of our lifetime.

And if your mission is to make customers’ lives easier and better every day, and if you believe that it’s going to be the most transformative technology of our lifetime, you’re going to invest very expansively, which is what we’re doing. And you can see it everywhere.

In our consumer businesses, you can look at our shopping assistant in Rufus. You can look at the next generation of our personal assistant in Alexa Plus. You can look at how it’s changing how we forecast and our fulfillment network. Very significant gains for us.

PW: Yeah. So you look at a lot of these things and say, “Wow, it could be transformative.” Like, Industrial Revolution transformative. I mean, literally something that could be a big game changer.

Because, as I’ve said before, they’ve talked about how when you’re looking at the person at work, the physical person at work, the Industrial Revolution made things a lot easier. And people worry about, though, that it’s a job taker, and I get it. That is a huge concern that people have.

And there was some talk about that as well on the financial channels. And I thought that this one gentleman, I think that he was the CEO of SoFi, he was talking about that very topic.

Julia Boorstin: When you look at the evolution of this younger consumer, the new CNBC Generation Lab poll shows that young people are so worried about AI taking their jobs. How do you expect that consumer to change in terms of the services that they get from SoFi?

Anthony Noto: What I’d say is every innovation drives more opportunities. Yes, some of the opportunities closed, but it’ll create new opportunities. And I believe our country, with the strongest economy, the strongest level of innovation, the strongest military, the strongest currency, will continue to drive opportunities for American people, and the innovation will just cause those opportunities to change.

You can’t really predict what they will become, but without a doubt, if you look at every cycle in history, when you’ve had these big super cycles from technology, it’s created more opportunities, not less. And I think that will be the case here.

PW: I think that that is critical to understand.

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When you have technological change, you will have people come out of the woodwork, scared about what it’s going to lead to, but it has always led to opportunity. 

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And being optimistic makes sense.

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